KSD and Hana Bank Sign Business Agreement to Establish Foreign Currency Repo Simultaneous Settlement System

Park Sung-ho, President of Hana Bank (left), and Lee Myung-ho, President of Korea Securities Depository (right), are taking a commemorative photo after signing a business agreement to establish a foreign currency repo simultaneous settlement system. Photo by Korea Securities Depository

[Asia Economy Reporter Lee Seon-ae] The Korea Securities Depository (KSD) announced on the 1st that it signed a business agreement with Hana Bank on the 29th of last month to establish a 'Foreign Currency Repurchase Agreement (Repo) Delivery Versus Payment (DVP) System.'

The KSD explained that the agreement was made to support the simultaneous settlement of securities and foreign currency payments involved in transactions, in order to enhance the settlement safety of foreign currency repos aimed at raising foreign currency funds.

According to the agreement, both parties will cooperate on ▲ establishing the foreign currency repo simultaneous settlement system ▲ promoting the system after its establishment to activate its use ▲ continuously improving the system and revitalizing the foreign currency repo market.

The foreign currency repo simultaneous settlement system is scheduled to officially open this month after final testing with participating institutions in foreign currency repo transactions such as securities firms, banks, and brokerage firms.

Currently, foreign currency repos are traded only through a free of payment (FOP) method, where securities delivery and payment are made separately. In contrast, Korean won repos can be settled simultaneously in connection with the Bank of Korea.

The KSD expects that once the foreign currency repo simultaneous settlement system is established under this business agreement, principal risk in foreign currency repo transactions will be fundamentally eliminated, enabling rapid procurement of foreign currency funds.

The KSD initiated the establishment of the foreign currency repo simultaneous settlement system as domestic financial institutions' demand for foreign currency has recently increased, along with a steady rise in foreign currency repo transaction performance.

Lee Myung-ho, President of the KSD, said, “The foreign currency repo simultaneous settlement system being established through this business agreement is timely for activating foreign currency procurement,” and added, “It will dramatically improve the stability and efficiency of the repo transactions.”

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